Stock to Avoid: Luxfer Holdings


Zacks Investment Research downgraded Luxfer Holdings PLC (LXFR) to a Zacks Rank #5 (Strong Sell) on May 20, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.

Why the Downgrade?

Luxfer Holdings generated disappointing first-quarter 2014 results leading to nearly 7.7% fall in the company’s share price since May 7. Earnings were 28 cents per American Depositary Shares (ADS), below the Zacks Consensus Estimate of 32 cents per ADS and down 17.6% from the year-ago quarter.

Revenues increased by a mere 0.7% year over year to $123.3 million, as much of the top-line improvement in the Elektron division was offset by weak results in the Gas Cylinders division. A slight increase of 0.3% was recorded in the cost of sales. Cash position weakened, declining 34.9% sequentially.     

Lackluster quarter results triggered downward revisions in the earnings estimates for Luxfer Holdings. Over the last 30 days, the Zacks Consensus Estimate has fallen 9.0% to $1.42 for 2014 and 2.6% to $1.85 for 2015.

Lowered earnings estimates along with a negative 7.7% average earnings surprise have made us skeptical about Luxfer Holdings’ performance in the coming quarters. The company has an Earnings ESP of -11.8% for second-quarter 2014, -4.2% for 2014 and -4.6% for 2015.

Other Stocks to Consider

Luxfer Holdings has a $494 million market capitalization. Some better-ranked stocks in the diversified machinery industry include Gorman-Rupp Co. (GRC), Illinois Tool Works Inc. (ITW) and Nordson Corp. (NDSN). While Gorman-Rupp sports a Zacks Rank #1 (Strong Buy), both Illinois Tool Works and Nordson hold a Zacks Rank #2 (Buy).

Read the Full Research Report on LXFR
Read the Full Research Report on ITW
Read the Full Research Report on NDSN
Read the Full Research Report on GRC

Zacks Investment Research

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